Disney can drop nomination proposal

Shareholder plan not required on ballot, SEC says

December 30, 2004|By Bloomberg News.

WASHINGTON — The staff of the Securities and Exchange Commission, reversing an earlier recommendation, said Wednesday that Walt Disney Co. doesn't have to include on its proxy ballot a proposal allowing investors to nominate candidates to the company's board.

Disney asked the regulator in three letters this month to alter its position on the shareholder resolution, proposed by investors including the California Public Employees' Retirement System, the New York State Common Retirement Fund and the pension plan of the American Federation of State, County and Municipal Employees.

"The division has reconsidered its position and there appears to be some basis for your view that Disney may exclude the proposal," said Alan Beller, director of the SEC's Division of Corporation Finance, in a letter to Disney lawyer Martin Lipton. Lipton's office provided the letter in an e-mail.

The reversal puts pressure on SEC Chairman William Donaldson to define how shareholders may nominate directors or to drop the issue.

Last year, the agency proposed letting investors put candidates on proxy ballots under some conditions, though the plan stalled after the Business Roundtable, a Washington corporate lobby group, and similar organizations said it would leave boards vulnerable to special interests.

"I'm a little surprised that they would keep it from the ballot," said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

The Disney decision may be "reflective more of the internal debate within the SEC on the appropriateness of the entire process," Elson said.

Disney spokeswoman Michelle Bergman declined to comment.

The SEC's proposal on allowing shareholders to nominate board members would let investors with least 5 percent of a company's shares take action after a current director's support was withheld by at least 35 percent of voting investors.

Shareholders also could offer a resolution calling for investor-nominated candidates to be included on the proxy. If that passed, nominations would occur the following year, according to the plan.

The proposal came under fire from executives, including Pfizer Inc. head Henry McKinnell, who said it brings "the worst of American politics" into the boardroom.

Rich Ferlauto, director of the state, county and municipal employees' pension investment policy, attributed the SEC's reversal in the Disney case to corporate pressure. "It signals there may have been political influence brought to bear by Disney," he said.

Ferlauto said the SEC should clarify the issue for investors by moving ahead with its rule to allow shareholder nominations, a measure Donaldson has said is an SEC priority.

Earlier this month, Donaldson said the agency, while still working on the plan, won't soon offer a compromise.

"We are nowhere near a resolution of the very difficult issues associated with shareholder access," he said.